Saturday, 29 September 2012

The big hope for the future of contactless payments launched recently without the NFC chip that would enable the iPhone 5 to drive forward the adoption of mobile payments in the mass consumer market. So why did Apple launch its latest device without NFC? Even allowing for Apple’s usual strategy of not being first, just being better, it feels like an omission and a missed opportunity for Apple. However given the fragmented state of the NFC market worldwide; the power draw on the battery of an additional radio; and the opportunity for Apple to leverage its existing payment accounts, rather than support Visa and MasterCard’s rails; then it begins to look very logical.

This episode underpins the argument that consumer payments innovation is still a confusing and baffling market for most consumers. Contactless take up has been slow on the card issuer side, the merchant acceptance side and the consumer usage side. That virtuous circle seems to be flaky at best.

But do consumers care about contactless payments? Contactless is meant to be simple but has the industry done enough to make it the default choice for consumers? More of my cards lack the contactless symbol than have it. Why do some PoS systems require me to ask to pay by contactless rather than assuming I will? As a firm proponent of contactless payments I always try to use my Bank of America PayPass MasterCard but contactless authorisation frequently fails; when I put it in the chip and PIN reader is goes through fine.

Apple’s view that Passbook is more relevant to consumers than NFC actually makes a lot of sense from the mass consumer perspective. It will drive non NFC contactless payment capabilities like the existing Starbucks prepaid ‘card’ app. And crucially it will improve the consumer payment experience with context sensitive popups – simple to use and a reminder to use.

Consumers care about cost, convenience and experience. If the industry focusses on those factors it can nudge consumers in the right direction. NFC is certainly one future for payments and people like Movenbank will make it relevant to consumers by combining it with an outstanding user experience. But the industry as a whole can do so much more to make it happen.

My final thought; it would be unpopular but pricing cash to reflect its financial and social costs would undoubtedly drive alternative payment models!

Confusion in the consumer payments market is a theme I will be returning to.